Agricultural Engineering Farm machinery , GATE, Graduate Aptitude Test In Engineering. Department of Agricultural engineering, Bachelor Of Technology

1. Program: B.Sc., Agriculture, Semester- III, 2020
AENG -211: Farm Machinery and Power
Er. Mukesh Kumar Seetpal
Assistant Professor, School of Agriculture
Unit No. - 2
Operating Cost of Tractor
Lecture No. - 10

2. Outlines
• Cost of Tractor
• Fixed cost of tractor
• Variable cost Tractor
• Calculations
• Numerical problem
• Assignment
• Learning Outcomes
• <References>

3. Estimating Cost of Tractor
 Under cost analysis the cost incurred per hour of operation of a tool/
implement/ machine is calculated. This will give an idea of the
payback period of the investment.
 This cost serves as the basis to fix up hire charges of the implement
for custom hiring
 Total cost of operation of an implement/ tool involves two costs
namely
1. Fixed cost
2.Variable cost or operating cost.

4. Types of Cost of Tractor
Fixed cost – This cost relates to machine ownership. This cost can occur
regardless of whether the machine is used or not. Fixed cost is inversely
proportional to the annual use. It includes depreciation, interest on
investment, taxes, insurance and housing costs.
Variable cost or operating cost – Those costs which are directly related
to the amount of use are called variable costs. These costs are incurred
only when the machine is used. Variable costs include repair and
maintenance, fuel and lubricants, servicing and labour charges.

5. Depreciation - It is the reduction in value of the machine with the
passage of time. In the usual situation with field machines being operated
only a few days in a year year, obsolescence is the most important factor
affecting the depreciation (Obsolescence is the state of being which
occurs when a person, object, or service is no longer wanted even though
it may still be in good working order). A machine may become obsolete
because of the development of improved models, changes in farm
practices etc.
The following expression based on the straight line method is used to
calculate the depreciation
.
Calculation of Fixed Cost

6. D = [(C - S﴿ / (L x H) ]
Where
D = Depreciation cost, Rs/hr
C = Initial cost of the machine, Rs
S = Salvage value of the machine, usually taken as 10 per
cent of the initial investment of the machine Rs,
L = Expected life period of the machine, years H=
Number of working hours per year
Note: Salvage value is the estimated value of an asset at the end of its
useful life.

7. II- Interest on investment- Interest on investment in a farm machine is
a legitimate cost, since money spent in buying a machine cannot be used
for other productive enterprises. Annual charges of interest should be
calculated on the basis of the actual rate of interest payable. The rate of
interest should reflect the prevailing rates (14%). The interest on
investment is calculated by using formula given below.

8. I = (A×i) / (100×H)
I = Interest per hour
i = % rate of interest per year
The average purchase price shall be calculated by the following
expression. A = (C + S)/2
Where,
A = Average purchase price, Rs
C = Initial cost of the machine, Rs.
S = Salvage value of the machine, usually taken as 10
percent of the initial investment of the machine, Rs.

9. III- Taxes, Insurance and Housing
 Sales tax and road tax can be distributed over the life of the machine.
Farm machinery is sometimes insured against loss by theft or damage.
 Actual amount paid or to be paid annually for insurance and annual
taxes if any should be charged.
 If the information is not available it may be calculated on the basis of
2 per cent of the average purchase price per annum.
 The charge for housing is taken as 1 per cent of the average purchase
price of the machine.
 So the charges for taxes, insurance and housing can be taken as 3 %
per year of the average cost of the machine.

10. Taxes, insurance & housing cost per hour = 3A / (100*H)
A = Average purchase price
H = Number of working hour per year
The total fixed cost is the sum of depreciation (D), interest on investment
(I) and Taxes, Insurance and housing (T, I and H) charges.

11. 2. Variable cost
1. Repair and maintenance cost - Repair and maintenance costs are
necessary to keep a machine in perfect working condition due to wear,
part failure, renewal of tyre and tube and accidents. The repair and
maintenance costs shall be calculated as 6-10 per cent of the initial
cost of the machine per year.
Repair & Maintenance cost / hour = (10 × C) / (100 × H)
C = Initial Cost of Machine
H = Number of working hour per year

12. 2. Fuel cost – Fuel consumption depends on the size of the power unit.
The cost of actual fuel consumptioncan be used in calculations
Fuel cost F = Quantity of fuel consumed per hour (Lit per hour) (Rs/hr)
x Cost of fuel (Rs/lit)
3. Lubricating oil cost - Cost of lubricating oil can be taken as 30 %
of fuel cost
Oil cost = 30 / 100 x Quantity of fuel consumed per hour (Rs/hr)
(Lit per hour) x Cost of fuel (Rs/lit)

13. 4. Operator cost - In performing custom work, the actual number of
operators engaged for carrying out the operation should be used for
calculation of operator charges. The prevailing rate of wages has to be
adopted for calculation.
Operator cost (Rs/hr) = (Number of persons engaged x wages per
Day)/ 8
The total variable cost is the sum of repair and maintenance cost (R
&M), fuel cost, oil cost and operator charges.

14. Numerical Problem
Find the cost of using a tractor per hp-hr when the cost of 35 hp tractor is
Rs. 300000, life of tractor is 10 year, rate of interest 10% and working
hour per year is 1000 hours.
Solution – 1. Depreciation (D) /hour = (C-S)/ (L × H)
= (300000 – 300000 ×0.1) / (10 × 1000)
= Rs. 27.00
2. Interest (I)/hr = [(C+S)/2] × (i/H) = (A×i/100)/H
= [(300000 +300000 ×0.1) / 2] × [10/(100 × 1000)]
= Rs. 16.50

15. Numerical Problem
3. Housing cost per hour = (300000 × 1) / (1000 × 100) = Rs. 3.00
4. Insurance cost per hour = (300000 × 1) / (1000 × 100) = Rs. 3.00
5. Taxes cost per hour = (300000 × 1) / (1000 × 100) = Rs. 3.00
Total Fixed cost /hr = 27+16.5+3.00+3.00+3.00
= Rs. 52.50
Operating Cost
1. Fuel cost/ hr = 6 × 24 = 144
Take fuel consumption = 6 litre/hour and cost of diesel Rs. 24.00 per litre

16. Numerical Problem
2. Lubrication Cost/ hr = 144 × (30/100) = Rs. 43.20
3. Repair and Maintenance cost/hr = (300000 × 10) / (100 × 1000)
= Rs. 30.00
4. Operator Cost/hr = 150/8 = Rs. 18.75
Assume wage of operator per day Rs. 150/-
Total operating cost = 144+43.20+30+18.75
= 235.95
Total cost/ hr = Fixed cost + Operating Cost = 52.50+235.95 = 296.45
Cost of tractor/hp-hr = 296.45/ 35 = Rs. 7.89

17. Assignment
Explain different types of cost of tractors.

18. Learning Outcomes
The learners may aware about various cost included in tractor operation
per hour. These calculation help him to calculate operating cost of tractor
per year and that will decide is tractor purchasing beneficial for farmer or
not.

19. References
1. Dr. Jagdishwar Sahay; Element of Agricultural Engineering,
Standard Publishers Distributors.
2. O.P. Singhal; Element of Agricultural Engineering, Aman
Publishing House.
3. http://ecoursesonline.iasri.res.in/course/view.php?id=141